21 Jan 15

Used car prices can evolve differently on both sides of the Atlantic

The value of used cars depreciated some 12% in the USA during 2014 and that’s not a bad performance. According to Black Book, in 2013 the sector recorded depreciation of 12.8%, meaning that last year was a slightly better year. December was a good month, the residual value of cars falling 1% against a 1.9%  decline the previous month. The average depreciation of used cars on a yearly basis is 15 to 18%, not taking into account periods of economic recession. The worst performance last year was observed in the luxury segment of the market, the average decrease in this category being over 18%. For full-size passenger cars the depreciation level was only 3.8%. Compact pickups, compact SUVs, full-size pickups and mid-size pickups managed to decrease the drop in value to a range of 4 to 7%.

And for 2015…?
The next question is of course what 2015 will mean for the remarketing market. The economy will once again represent the major determining factor for the market. Economists expect the American economy to be second to none in 2015. This means that the United States will have price evolution on the market for used cars in its own hands. Assuming there are no ‘black swans’ – events that nobody expects – the US may well remain the driving force behind the world economy. But China will also be an important factor. A hard landing for the Chinese economy has the ability to spell much danger for the world economy.

Where Europe is concerned, the forecasts are less optimistic. The European Central Bank would appear to have lost its grip on the economy. The question everybody is asking is whether the German economy can avoid a downturn. If the European economy were to remain weak in the months to come, the forecasts for the remarketing market will be anything but brilliant. If and when the European economy returns to growth, remains for now a big question mark.

Oil prices
In 2015 everyone will be watching the oil market closely. According to some experts the price of a barrel of crude may drop as low as 25 dollars. This scenario could make 2015 the year of the not so fuel-efficient models. Lower oil prices don’t encourage the sales of fuel-efficient models. And on top of this the increasing age of cars on the roads may put pressure on values in the mid-size segment: depreciation here could increase this year to around 15%. Black Book expects that in the compact and full-size car segments there will be depreciation of about 15%.

Authored by: Tim Harrup